Bitcoin. What does Krugman have no idea about?

Blogger, a convinced user of Fiat currencies and Nobel prize winner in Economics Paul Krugman on the pages of the New York Times asked readers to give him an answer to the question "what problem cryptocurrencies solve", reports Spectator.

"Governments sometimes abuse the privilege of creating money, but for the most part they and Central banks exercise restraint." Unlike bitcoin, " Fiat currencies have a basic value protected by people with weapons; and it's not a bubble that will burst if people suddenly stop believing in them," Krugman added.
What the expert did not mention is that bitcoin has been successfully operating for almost ten years, without confirmed cases of fraudulent transactions. Every day the volume of its trades reach billions of dollars.

In fact, bitcoin's growing reputation for security means that it is a serious phenomenon with a great prospect. Maybe the market knows something about bitcoin and Central banks that Krugman has no idea about?

If you look more closely at the track record of "government" money, it is possible to describe other prospects than through Krugman's pink glasses.

Zimbabwe and Venezuela are experiencing the collapse of the financial system, Argentina, Iran and Turkey are one step away from disaster. A quarter of a billion people live in a collapsing economy. Apparently, it's not enough for Krugman to stop admiring state control over money.

Since the end of world war I, hyperinflation has increased 57 times, killing several billion people. And all thanks to money whose value is supposedly protected by people with weapons that have already become useless.

Indeed, hyperinflation is an economic catastrophe peculiar to money created by the government. Note that this did not happen when the economy was based on the gold or silver standard. "Government" money is inexpensive to produce, so they can be stamped endlessly.

We've watched people lose all their savings over the course of months or even weeks. This happens when people who are not in their place get control over the financial levers. Whatever benefits managed by the government, hyperinflation outweigh them.

Most countries have not yet experienced hyperinflation, but almost all have experienced significant currency devaluation for a long time. For example, from 1960 to 2015, the money supply of all countries increased by an average of 32% per year.

It seems that Krugman does not believe that the value of public money should be supported intellectually. Instead, he believes that "men with guns" is the most convincing argument. The good news for him is that intellectual foundations don't matter if they contradict market realities.

Using the power of the state protects the economic monopoly. The bad news in this case is that the decentralized bitcoin movement, digital and cryptographically secure, is much harder to stop with weapons.

Krugman appeals to the relatively high cost of bitcoin transactions, so the cryptocurrency cannot compete with the Fiat currency in the long term. It seems that he mistakenly believes that bitcoin competes with Visa or PayPal payment systems.

But bitcoin is not created for that. Rather, it is an international payment network that competes with the Central Bank payment systems on which Visa or PayPal networks depend.

It is important to note that bitcoin transaction fees are lower than traditional payment systems. And this is not to mention the fact that bitcoin offers international clearing within an hour, while the existing banking system it takes days and sometimes weeks.

In addition, despite all the statements of skeptics and forecasts about the imminent collapse of BTC, bitcoin added 700 000 000% against the us dollar in nine years of trading.

Perhaps the most convincing argument in favor of bitcoin is a completely apolitical and predictable monetary policy. For example, bitcoin cannot be used for quantitative easing. At the same time, you will not be able to produce BTC more than is necessary and possible.

If the further growth of bitcoin will deprive Central banks of the opportunity to Finance catastrophic wars by printing money, energy consumption for mining will not be high, then BTC will be the best invention of mankind.

Can bitcoin collapse? Perhaps it's possible. Any investor who invests serious amounts in bitcoin should know that risks exist. Although after a serious decline in the price of bitcoin has stabilized, a few years ago it was more volatile.

Can state currencies and bonds collapse or fall significantly in price, despite the protection of "people with weapons"? After hyperinflation, financial repression and defaults, Yes!

It is not surprising that many people do not share Krugman's enthusiasm, this is precisely the problem that bitcoin solves. This cryptocurrency offers any inhabitant of the world to get rid of the control of economists who believe that they should not listen to the lessons of history.